7 point guide to applying for a credit card in the UAE

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We bring you the best advice from UAE financial experts on the credit card process

Dubai: When you first look for a credit card in the UAE, the options can be overwhelming. There are over 200 cards to choose from, with each offering a multitude of perks. Should you go for a card which offers zero annual fee? Are cashback rewards better than offers like lounge access or free rounds of golf?

Here we break down how you can find the card that suits your lifestyle best. However, what is important to know is that, ideally, a credit card should be helping your lifestyle, supplementing your existing needs and not pushing you towards excess spending.

1. Analyse your expenses

Find out which kind of purchase costs you the most through the year – you children’s school fees, family’s air tickets or groceries? Once you have a fair idea of which type of expense is the highest, you can look for credit cards that have offers in those categories. Maybe a bank has tied up with the hypermarket you shop at regularly, to offer points that can be redeemed for purchases.

2. What are the benefits you are looking for?

There are several credit cards available in the market offering reward programmes, lower interest rates, higher credit limits, no annual fee and much more, but the features that are best for you are generally based on your actual usage. Perhaps you enjoy going for golf, or are a sports lover who wants to get tickets for European club football? Maybe you want cash back or want travel perks like special lounge access. Banks often provide special cards based on customers’ needs, which might help boost your lifestyle without costing you extra.

3. Are you confident you will be paying your dues every month?

Most banks offer credit limits that are twice or three times a customer’s monthly salary. This can lead to the temptation of overspending.

If you are unsure of your spending habits and could be late on payments, choose the card with the lowest interest rate. However, if you are a highly disciplined spender and are sure you will be repaying for all your expenses before the due date, you can look for cards with greater perks but higher interest rates (which will only apply if you default on your payments).

4. Are free-for-life cards always the best?

Almost all banks have free-for-life credit cards, but it isn’t necessary that these are the ones you should go for. While paying anywhere between Dh700-Dh2,000 every year might seem like an additional cost, look at the details of the card’s perks. Will using the card smartly and availing of these perks save you a lot more than what you have to pay each year. Also, not every card that is advertised as ‘no annual fee’ is free for life. Always read the fine print to check if the ‘no annual fee’ offer is only for the first year, or for the complete time of use.

 

5. Understand the interest rate

When you look at the basic details of the card, the interest rate is shown in single digits, which can be slightly misleading. These are not annual profit rates but monthly. The annual profit rate (APR) can come up to 48 per cent for some banks. This is why credit card debt is one of the worst kinds of debt you can get into, which is why it is advisable to never overspend. If you want to make big purchases or expenses like renovating your home or going on a holiday and do not have the cash readily available, a personal loan would make more financial sense than making the payments on your credit card and letting the interest accrue.

Islamic banks are Sharia-compliant so interest or profit is not charged on the outstanding amounts. This might be something to consider while choosing your credit plan. They, however, might have other service charges that you should look into.

6. Understand what the perks mean

Take some time out to analyse each perk, which might seem attractive at first glance, but the terms and conditions for availing might make it impractical for you.

Is there a minimum spend the bank expects from you before enabling access to a perk? Are cashback rewards tied up to specific brands and retailers? From air miles, lounge access and balance transfer to Islamic finance services and no salary transfer requirements, banks can throw a lot at you in terms of perks. You, as a customer need to analyse each offer to ensure it benefits you.

7. Where do I start?

There are several online comparison websites that you can log on to that break down the basic details of every possible credit card in the UAE. It is not necessary that you get the credit card from the bank that you have a savings or current account with, so make sure you take the time to do your research before making the decision. Also, if you receive a call from a customer service representative of a bank providing details of an offer or promotion on a credit card, do not give your consent solely on the information you have received over the phone. Unless you see the details of the contract and pore through the fine print, you should not be signing a contract.

Once you have looked at all these details and ensured there are no caveats that you have missed, you will be in a better position to make sure the credit card works for you and supports your financial goals.

 

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